The Hidden Cost of Hiring Software Engineers—$22,750/hire

Nov 3, 2016Nathan Doctor

Great companies spend immense resources searching for talented engineers, and even more to bring them onto the team. These recruiting and sourcing costs add up quickly.
While these costs amount to a serious expense, with salary making up the majority of engineering budgets, they don't expose the true cost of hiring to companies. The real cost of hiring engineers is far less apparent. It's hidden in a subtle way, but can seriously drain resources and productivity.

This hidden cost of hiring is embedded in the hundreds of hours your engineers spend evaluating and assessing candidates. Through resume review, phone screens, technical interviews and extensive on-sites, days worth of time is allocated to candidates, the majority of which don't make it to hire. These talented (and expensive) team members' energies should be focused, as much as possible, on innovating and building product - the tasks that will drive the company forward.

The true, hidden cost of hiring - your engineers' time - reduces your company's ability to innovate and could be costing you $22,750 of enterprise value per hire.

The Value of your Engineers

All of our hiring expenses, both apparent and discrete, go into finding great engineers precisely because of how valuable they are to the organization. Their value stems from their large impact on the product and the technology that drives the business forward.
Their skills and talents are cultivated over years of professional experience. These engineers pour their enthusiasm and abilities into writing great software, which is why we bring them onto our teams. Yet engineering teams still carry a heavy burden in the hiring process, the necessity to evaluate and assess potential hires, with countless hours of their time.

Inefficient use of Engineering Time

All too often a company's hiring process overuses their engineering talent for pre-screens and interviews, many times with candidates who aren't qualified to begin with.
On larger teams, engineers are often scheduled out to interview candidates who have only been minimally pre-screened. They spend their time reviewing code samples and projects, running on-site interviews, and holding technical phone screens with candidates who don't even end up making it far in the hiring process.

In smaller and growing teams, this burden often falls to the already overworked CTO, VP or Director of Engineering. With minimal recruiting infrastructure, or dedicated recruiters, they are forced to field all candidate flow. This becomes a major distraction to their most important duty - leading the existing technical team and ensuring engineering resources are produced effectively.

Regardless of the spectrum of company size and the seniority of engineers, it is vital that companies find the right balance within the hiring process in order to ensure that valuable engineering hours aren't being wasted.

$22,750 in Costs

Assume a developer's cost of productivity to the company is roughly $350/hr (far more for team leads and directors). This estimates the value that a software developer's work delivers to your company in the form of product improvements and innovation. These improvements then result in increased growth, improved sales and added business-value. This can be broken down based on the base cost of salary (avg. $120,000/yr for an experienced developer), the 25–50% extra enterprise costs (benefits, healthcare, perks, employer taxes), and the premium of return, the company expects to receive on top of it, about 3x the full cost.

We then look at the three main tasks that company has to fulfill to review each potential hire - the resume review, a phone screen, and an in-person interview. Typically companies see a large ratio of applicants/interviews/hires, in Marketo's case their 80/8/1 rules, whereby 100 applicants will lead to 10 interviews which results in 1 hire. This number ranges although it's safe to say that companies look at over 60 resumes, get on a phone call or technical screen with 10 of them and will do 5 in-person interviews to find their next engineering hire. This allocation can shift based on roles, if the company has full-time recruiters, how many candidates they send to engineering/tech phone screens, and if the engineering lead is doing resume review. In general, these hours break down to:

__Resume Review __

60 resumes * 5 mins = 5 hrs

__Phone/Tech Screen __

10 screens * 60 mins = 10 hrs

In-Person Interview (day-long, across multiple interviewers)

5 interviews * 10 hrs = 50 hrs
65 hrs at $350/hr = $22,750
This comes to an average of 65 hours per engineer hired for $22,750 of business costs, and even more for longer processes or more competitive positions. With the importance of engineering innovation and progress, this is not a cost that we want to ignore.

Recruiting as a Burden on Developers

While the sheer hours that get wasted on ineffective and unnecessary interviews can take a huge toll on productivity, there are even further impacts that result from the energy expense.

Seemingly small distractions can completely undo hours of work. Interviews, with potentially unqualified candidates, distract engineers from what they were hired to do - use code to solve problems. This requires focus in order to perform optimally, especially when faced with difficult technical demands. Because it takes continuous precise focus to work toward an effective solution, this distraction can actually have a demoralizing effect as it breaks work flow - short-term memory gets loaded with all of the moving parts, leaving engineers to rebuild their mental model and take even more time to simply get back to even. An hour long distraction can actually debase hours of work.

Invest Engineering Resources Wisely

Now that we've dissected the ways in which engineering teams time and focus can get squandered during recruiting, let's discuss how we can solve this.
Reducing this $22,750/hire cost comes down to improving recruiting process. We want to increase efficiency so that manual technical screens are only done with worthy candidates, and that only viable talent is making it to each on-site interview.

We must view each engineering interview as an investment. We should only be using an engineering teams' time with candidates that have a high likelihood of being hired. We don't want to scatter these valuable investments with anyone who enters the process, but rather only those who show strong promise of maturing into a full hire.

Increasing Process Efficiency

The best processes that result in the most efficient use of engineering time often filter candidates beforehand so that coding competency has already been determined. This can be done in a variety of ways, through skill assessments, referral-based hiring, and coding competency tests. This serves to accelerate the process, while simultaneously allowing engineers, CTOs, VPs and Directors of engineering to focus on their main tasks, only investing in a few interviews with promising candidates. In addition, this process is respectful to the candidate's time, as it allows for quick and deliberate decision when an otherwise drawn out process may not lead anywhere.

This is the reason we built Qualified.io to save engineering teams time and accelerate their hiring process. In reducing the amount of time engineering teams spend evaluating candidates, we increase process effectiveness and identify great developers faster. This helps eliminate the hidden cost of the hiring process and allows your company to drive forward with every hour of engineering genius that you have.